Incident: On the afternoon of April 29, Inspur Information released its 2024 quarterly report. 2024Q1 achieved revenue of 17.607 billion yuan, an increase of 85.32% over the previous year; realized net profit of 306 million yuan, an increase of 64.39% over the previous year; and realized net profit of 240 million yuan without return to mother, an increase of 62.96% over the previous year.
Revenue picked up sharply, and cost control continued to be steady. 1) From a business perspective, 2024Q1 achieved revenue of 17.607 billion yuan, an increase of 85.32% over the previous year, and the net sales margin reached 1.68%. The overall increase in sales revenue was mainly due to increased customer demand and a sharp increase in server sales. 2) From a cost perspective, the company's 2024Q1 sales/management/R&D expenses were 2.69/1.27/632 million yuan respectively, with year-on-year growth rates of +19.36%/-17.48%/-2.36%, respectively. While sales revenue recovered sharply, the company had good control over the period expenses.
Stocking efforts have been strengthened, and contract liabilities highlight future revenue expectations. 1) In terms of contract liabilities, 2024Q1 achieved contract liabilities of 4.140 billion yuan, a year-on-year increase of 231.73% over the same period last year, and an increase of 116.47% over the beginning of this year, mainly due to an increase in advance payments; the sharp increase in contract debt is expected to bring revenue growth to the company in the future. 2) In terms of inventory, inventory for the quarter reached 24.290 billion yuan, an increase of 38.40% over the previous year. Demand for AI computing power and servers from downstream customers increased, and the company increased its efforts to prepare raw materials and improve supply chain stability.
Demand for servers continues to rise, and the leading position in the industry is stable. 1) At the liquid cooling server level, according to IDC data, the compound annual growth rate of China's liquid cooled server market will reach 45.8% in 2023-2028, and the liquid cooling industry will usher in the first year of truly “just needed” volume. As a leading server company, the company shipped 66,000 units in 2023, with a market share of 40.9%. Liquid-cooled server sales and shipments both ranked first in China, and is expected to benefit deeply from the AI liquid cooling industry trend. 2) At the company level, Inspur Information continues to implement the “All in Liquid Cooling” strategy and release full-stack liquid cooling products, so that all four series of products, general purpose servers, high-density servers, cabinet servers, and AI servers, support cold plate liquid cooling, and continue to improve product competitiveness.
Computing power and data storage are fully arranged, and we look forward to the release of the AI application market. The recently released enterprise model development platform “Yuanbrain Enterprise Intelligence” EPAI provides three ways to quickly connect large models to existing systems: APIs, interactive UI interaction, and smart devices that provide basic module support. It is expected to become a key variable in shortening the implementation of the big enterprise model. On IPF2024, Inspur Information officially released the X400, a super AI Ethernet switch dedicated to generative AI, which has the highest throughput of 51.2T in the industry, providing leading AI network performance for large-scale computing power.
Investment advice: The company's net profit for 24-26 is estimated to be 24.41, 30.19, and 3,522 billion yuan, respectively. The current market value corresponding to 24/25/26 is 25/20/17 times, respectively. Considering that AI computing power investment is expected to remain high, and the company's leading position in the server sector is remarkable, we believe that the current company is significantly undervalued and maintains a “recommended” rating.
Risk warning: risk of policy progress falling short of expectations, risk of technological innovation, risk of supply chain